WASHINGTON -- A former Global Crossing executive told congressional investigators Tuesday that top executives of the fiber-optic company misled analysts about the company's financial condition.

MARK SHERMAN

Published 12:00 am, Wednesday, September 25, 2002

Roy Olofson, Global Crossing's former vice president for finance, told an investigative subcommittee of the House Energy and Commerce Committee that the company entered into more than a dozen deals in early 2001 designed only to make the company seem financially robust.

On two occasions, he said, he heard then-CEO Thomas Casey tell financial analysts that Global Crossing had not engaged so-called swap transactions -- in which companies swapped capacity on their networks -- when Olofson knew otherwise.

"I became deeply concerned because I felt that the statement was inaccurate," Olofson said.

The committee is investigating whether Global Crossing and Qwest Communications, a provider of local telephone service in the West, engaged in "sham transactions designed to boost revenues" and thus give investors and financial analysts a misleading picture of the companies' financial health.

Former and current executives at both companies were expected testify Tuesday.

Rep. Billie Tauzin, R-La., chairman of the House Energy and Commerce Committee, compared actions taken by Global Crossing and Qwest to those taken by now-bankrupt energy trader, Enron Corp.

"Today we'll hear of similar efforts to deceive Wall Street," Tauzin said. "In this case we have evidence that Global Crossing and Qwest executives pursued sham transactions to put revenue on the books, to mislead investors and to prevent further drops in their stock prices."

Under investigation by the Securities and Exchange Commission, the Department of Justice and Congress, Denver-based Qwest said Sunday it is restating $950 million in revenue from swaps. Global Crossing, based in Bermuda, also is being investigated by those agencies and Congress.

Olofson warned Global Crossing's top attorney in August 2001 that misleading accounting practices were being used to enhance the company's financial condition.

Olofson gave Global Crossing general counsel James Gorton a detailed analysis of what he described as inflated revenue and cash-flow data that may have deceived investors. His letter became public a day after Global Crossing's bankruptcy filing.

A second hearing, tentatively scheduled for early next month, is expected to include Global Crossing Chairman Gary Winnick, whom committee aides said has not been cooperating with investigators, and former Qwest chief executive Joseph Nacchio, who has given several hours of closed-door testimony to investigators. Nacchio has defended the company's accounting and the swaps.

Global Crossing had hoped to dominate the market for high-speed communications with its unmatched 100,000-mile fiber optic network. It expanded so quickly that its network outpaced demands for its services, contributing to its deteriorating finances.